Check the Details! HMRC basic error loses £653K

Checking a basic date allowed alert accountants to save their client £653,000 by spotting a simple error, and then successfully challenging HMRC at the First Tier Tax Tribunal.

A recently published Tax Tribunal decision (Mabbutt Vs Commissioners for Her Majesty’s Revenue & Customs), was all about the date on a Tax Enquiry Notice sent by HMRC. The taxman has the right to enquire into a tax return by issuing a valid Enquiry Notice, within certain strict time limits. The tax officer intended to investigate Mr Mabbutt’s tax return for 2008/09 (i.e. covering the year ended 5 April 2009) as he had included a DOTAS (Disclosure Of Avoidance Scheme) reference number on the tax return for that year. However, the unfortunate taxman sent an Enquiry Notice stating the year ended 6 April 2009, in error. If the Notice was allowed to stand HMRC were looking to collect an extra £653,000. The Tax Tribunal judged in the taxpayer’s favour, deciding that a Notice stating 6 April was not valid to cover the year ending 5 April.

In the UK we are taxed according to strict laws laid down by Parliament. Tax inspectors are quick to point to the letter of the law if it helps them collect more money tax. Tax Investigation specialists have long been aware of the maxim that the devil is in the detail, and always take care to check the basics: to ensure that over-zealous (or under-trained) tax inspectors do not try to impose taxes in situations where Parliament has not authorised it. This case emphasises the importance of making sure that HMRC operates wholly within the strict letter of the law.

What Does It Mean For Me?
In any Tax Investigation or Dispute with HMRC it is crucial to check and test basic matters such as: was the Enquiry Notice issued within time?, Was it properly addressed and served?, Did it cover the correct period? The same goes for all Information Notices, Tax Assessments, Penalty Determinations etc. In particular, if HMRC do something subject to a condition (e.g. a time limit, or proving a “discovery”, or proving careless or deliberate behaviour), then it is essential to test if they have met the criteria. If not, they cannot proceed with that line of investigation.

How Can Lynam Tax Enquiry Experts Help Me?
Our tax investigation specialists know the limits of HMRC’s powers; and are adept at ensuring that tax inspectors do not overstep marks laid down by Parliament. In many cases this can result in substantial savings. If you are currently undergoing a Tax Enquiry then why not discuss it with one of our tax investigation specialists?